Internal Policies on Non-Regular Workers — Japanese Employment Law

In Japan, non-regular workers generally include fixed-term employees, part-time employees, dispatched workers, and other workers whose employment conditions differ from those of regular employees. Internal company policies governing these workers should comply with the Labor Standards Act, Labor Contract Act, Part-Time and Fixed-Term Work Act, and Worker Dispatching Act, as applicable.

The purpose of an internal policy is to establish consistent rules concerning recruitment, contracts, renewal, wages, working hours, benefits, evaluation, conversion to indefinite employment, and termination.

1. Written employment contracts

Companies should clearly specify the principal terms of employment for non-regular workers, including:

• Contract period.
• Possibility and criteria for renewal.
• Place of work.
• Duties.
• Working hours and breaks.
• Wages.
• Overtime arrangements.
• Paid leave.
• Retirement-related matters where applicable.
• Rules concerning termination and contract renewal.

A company policy should ensure that HR does not use vague or inconsistent renewal practices.

2. Fixed-term employment and renewal

Internal policies should distinguish between:

Fixed-term employment:
Employment ends at the agreed contractual expiration date, subject to applicable restrictions concerning non-renewal.

Indefinite employment:
Employment continues without a predetermined expiration date.

Repeated renewals can become legally significant. Under Article 19 of the Labor Contract Act, where a fixed-term contract has been repeatedly renewed or where the employee has a reasonable expectation of renewal, a refusal to renew may be restricted when the refusal lacks objectively reasonable grounds and social appropriateness.

Therefore, HR should document:

• Previous renewals.
• Employee performance.
• Business reasons for non-renewal.
• Communications concerning renewal.
• Any expectation created by the employer.

3. Equal and balanced treatment

Internal policies must address differences in treatment between regular and non-regular workers.

The Part-Time and Fixed-Term Work Act regulates unreasonable differences in working conditions between regular employees and part-time/fixed-term employees.

The company should therefore periodically compare:

• Basic wages.
• Bonuses.
• Allowances.
• Retirement benefits.
• Housing benefits.
• Family-related benefits.
• Welfare facilities.
• Training.
• Leave.
• Other employment-related benefits.

A difference is not automatically unlawful merely because one worker is regular and another is non-regular. The reasons for the difference and the nature of the employees' duties and responsibilities are important.

4. Explanation of differences in treatment

An internal HR policy should establish a procedure allowing a non-regular employee to ask:

"Why is my treatment different from that of a regular employee?"

HR should be able to explain the difference by reference to objective factors such as:

• Job responsibilities.
• Scope of duties.
• Transfer requirements.
• Experience.
• Performance.
• Length and nature of employment.
• Management responsibilities.

This helps the company demonstrate that employment conditions are based on legitimate employment-related considerations rather than arbitrary classification.

5. Conversion to indefinite employment

Internal policies must also address the indefinite-term conversion rule under Article 18 of the Labor Contract Act.

Generally, where a fixed-term worker's fixed-term contracts have been repeatedly renewed and the worker satisfies the statutory requirements concerning the total contract period, the worker may apply for conversion to an indefinite-term employment contract.

The policy should therefore include:

1. Monitoring of cumulative fixed-term employment.
2. Notification to employees about relevant rights.
3. A procedure for submitting conversion applications.
4. HR records of contracts and renewals.
5. Prohibition on retaliatory treatment for exercising statutory rights.

The purpose is to prevent HR from overlooking statutory conversion rights.

6. Internal recruitment and promotion

Non-regular employees should have access to clearly defined internal procedures where the company permits them to apply for:

• Permanent positions.
• Higher-level positions.
• Vacancies in other departments.
• Training programmes.
• Internal recruitment opportunities.

A policy should specify whether non-regular workers can compete for regular positions and what criteria apply.

7. Working hours and overtime

Non-regular status does not mean that ordinary working-hour protections disappear.

Internal policies should regulate:

• Daily working hours.
• Breaks.
• Weekly holidays.
• Overtime.
• Late-night work.
• Holiday work.
• Time recording.
• Approval of overtime.

The company should use the same reliable attendance system for regular and non-regular workers where possible.

8. Paid annual leave

Non-regular workers can acquire statutory annual paid leave according to applicable requirements.

The HR policy should therefore track:

• Date of employment.
• Attendance.
• Leave entitlement.
• Leave taken.
• Remaining leave.
• Expiry of unused leave.

HR should not simply describe a worker as "part-time" or "temporary" and assume that the worker has no paid-leave entitlement.

9. Social insurance and benefits

Depending on the employee's working conditions and statutory requirements, non-regular employees may fall within relevant social-insurance systems.

Internal policy should establish an HR checklist covering:

• Health insurance.
• Employees' pension insurance.
• Employment insurance.
• Workers' accident compensation.
• Other statutory benefits.

Eligibility should be assessed according to applicable statutory conditions rather than simply according to the label "non-regular employee."

10. Performance evaluation

Companies should establish transparent evaluation standards for non-regular workers.

Evaluation may cover:

• Attendance.
• Quality of work.
• Productivity.
• Compliance.
• Skills.
• Teamwork.
• Customer service.
• Achievement of assigned responsibilities.

The company should avoid using a worker's non-regular status itself as a negative performance factor.

Important Japanese Case Laws

1. Nagasawa Unyu Case — Supreme Court, 1998

The Nagasawa Unyu case is relevant to fixed-term employment and the legal significance of repeated contract renewals.

Japanese courts have examined the actual circumstances surrounding fixed-term employment rather than relying solely on the wording of the contract.

Policy lesson:
HR should maintain accurate records of renewals and should not make arbitrary non-renewal decisions after creating an expectation of continued employment.

2. Toshiba Yanagimachi Factory Case — Supreme Court, 22 July 1974

This is a leading authority concerning repeatedly renewed fixed-term contracts.

The Supreme Court recognized that where fixed-term employment has repeatedly been renewed and circumstances create an expectation of continued employment, non-renewal may be subject to principles comparable to dismissal.

Policy lesson:
A company should establish consistent renewal criteria and communicate them clearly to fixed-term employees.

3. Hitachi Medico Case — Supreme Court, 4 December 1986

The Hitachi Medico decision concerned fixed-term employees and workforce reduction.

The Supreme Court examined the circumstances surrounding termination/non-renewal and the employer's workforce-reduction situation.

Policy lesson:
A policy for non-regular workers should distinguish legitimate workforce-management decisions from arbitrary treatment of fixed-term employees.

4. Hamamatsu Hospital Case — Supreme Court, 2015

The Hamamatsu Hospital case is significant in relation to treatment of non-regular workers and employment conditions.

It demonstrates the importance of examining the actual nature of the employment relationship and the statutory framework applicable to different categories of workers.

Policy lesson:
Internal policies should classify workers accurately and should not assume that every non-regular worker can legally be treated in exactly the same way.

5. Japan Post Tokyo Case — Supreme Court, 15 October 2020

The Japan Post Tokyo case concerned differences in treatment between regular employees and fixed-term employees.

The Supreme Court examined differences concerning employment-related benefits and whether those differences were reasonable in light of the statutory framework.

The case is particularly important because the Court separately considered individual benefits rather than treating all differences between regular and fixed-term workers as one issue.

Policy lesson:
Companies should conduct benefit-by-benefit comparisons rather than adopting a blanket rule that "non-regular workers receive fewer benefits."

6. Japan Post West Japan Case — Supreme Court, 15 October 2020

In the Japan Post West Japan case, the Supreme Court also examined differences in treatment between regular and fixed-term employees.

The decision is important for understanding the statutory prohibition on unreasonable differences in working conditions.

Policy lesson:
Internal HR policies should identify the purpose of each benefit and assess whether different treatment between regular and non-regular workers has a rational employment-related basis.

Practical Internal Policy Structure

A Japanese company can structure its Non-Regular Worker Policy as follows:

Recommended HR control system

Recruitment → Written contract → HR classification → Attendance monitoring → Performance evaluation → Renewal review → Benefit comparison → Conversion-right monitoring → Grievance procedure → Termination/non-renewal review

This creates an auditable system and reduces the risk of inconsistent treatment of non-regular employees.

Conclusion

Internal policies on non-regular workers in Japan should not merely state that temporary or part-time workers receive different treatment. They should establish objective rules for recruitment, contracts, renewals, wages, benefits, working hours, leave, evaluation, conversion to indefinite employment, grievances and termination.

The major case-law lesson is that Japanese courts examine the substance and circumstances of the employment relationship, particularly where contracts have been repeatedly renewed or where differences between regular and non-regular workers are challenged. Consequently, HR should maintain detailed records and be able to explain the reason for each significant employment decision.